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  • Rev Shark:

    Keep an Ear Open to the Bearish Bent
    8/8/2005 8:35 AM EDT

    "The trouble with most of us is that we would rather be ruined by praise than saved by criticism."

    -- Norman Vincent Peale

    I've often contemplated why it seems that so many experienced market commentators seem to have a bearish bias. The folks who have been around the market for decades seem to have a general inclination to be critical. The best will have flirtations with a bullish bias now and then, but they always seem to be skeptical of the market. Are they just becoming cantankerous in their old age or is there a good reason for this grumpiness?

    If you have made big money in the market over the years, looking for negatives is a good way to preserve your profits and your capital. The folks who have been successful over the long term are simply doing what is in their own best interest -- to be conservative and protect what they already have, rather than aggressively try to grow their capital.

    Of course, some of the old timers go too far and become useless perm-bears who are so entrenched in their pessimism that they seldom offer positive advice. On the other hand, the experienced pro who tends to error on the side of caution can offer some good insights into why and when to be defensive.

    There are always folks willing to praise the market and talk about how good things are. Many of them have no goal other than to get their hands on your capital and are willing to tell you just about anything you want to hear to accomplish that. They shrug off the grumpy old pros as out of touch and unrealistic and in many cases they are right.

    When the market begins to struggle a bit like it has over the past week it may be time to pay closer attention to the curmudgeons. What are the latest worries and concerns and are they being recognized by the market?

    The two big worries in this market right now are interest rates and crude oil prices. The solid jobs report on Friday raised concerns about inflation and the likelihood that the FOMC will continue to raise rates. Crude oil only adds to the concerns as it hovers at record highs and shows few signs of abating.

    The grumpy old bears have been wrong about this market for quite a while but we are now seeing some signs of stress. With the dog days of summer upon us, technical breaches of support levels and interest worries in the air, it may be time to pay attention to these folks. They not only made some money over the years -- they managed to hold on to it.

    We have a positive start to the day. Overseas market were generally stronger but much of that is because of strength in oils. We have some mergers and generally positive Monday morning action but this is a market that needs to find its footing because a downtend is starting to develop.

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